Green Mountain Coffee Roasters, the maker of the popular single-serve Keurig coffee machines, is throwing some small competitors for a loop. The company revealed recently that new Keurig brewing systems would no longer accept “unofficial” private-label K-cups—the small pods that contain the coffee.
The new machines, called Keurig 2.0, are expected to hit the market this fall and will include digital rights management (DRM) encryption technology that won't brew pods not licensed by Keurig.
The move, confirmed in an earnings call by CEO Brian Kelley, is an attempt to hurt the sales of imitation and reusable pods, which have increasingly eaten into Green Mountain’s K-cup market share. Private-label pods—made by everyone from large companies like Starbucks and Dunkin’ Donuts to small coffee companies—often sell for 25 percent less than Keurig-brand K-cups, according to The Verge. The market for private label K-cups has climbed since Green Mountain’s patent on the K-cup expired in 2012.
Rival brands comprised about 8 percent of the single-cup pod market by late 2013, according to USA Today, and that share was expected to keep growing as consumers sought eco-friendlier and more affordable K-cups.
Green Mountain’s move is likely to upset many small companies that have made forays into the single-cup coffee business in recent years. One company, TreeHouse Foods, has even sued Green Mountain claiming that the company has been forging “exclusionary” with suppliers and distributors to push competition out of the market.
While consumers may not immediately trade up to the new Keurig brewers—especially since they would no longer be able to buy private label pods—the move could ultimately hurt companies that have focused more and more on the single-serve coffee market.
There’s a lesson for small businesses here: Be careful before entering a market overly dependent on one company or brand (in this case, Keurig). And if you do, don’t put all your eggs in one basket.
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